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Competing with information technology
- 1. Competing with information technology Topics: -Fundamentals of Strategic Advantage -Using information Technology for Strategic Advantage
- 2. The Competitive Environment Threat of New Entrants Bargaining Power of Suppliers Rivalry Among Existing Competitors Threat of Substitutes Bargaining Power of Customers
- 3. Fundamental Competitive Strategies Cost Leadership Strategies Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies
- 5. Competitive Strategies & the Role of IT • Cost Leadership (low cost producer) – Reduce inventory (JIT) – Reduce manpower costs per sale – Help suppliers or customers reduce costs – Increase costs of competitors – Reduce manufacturing costs (process control)
- 6. Competitive Strategies & the Role of IT (continued) • Differentiation – Create a positive difference between your products/services & the competition. – May allow you to reduce a competitor’s differentiation advantage. – May allow you to serve a niche market.
- 7. Competitive Strategies & the Role of IT (continued) • Innovation – New ways of doing business – Unique products or services – New ways to better serve customers – Reduce time to market – New distribution models
- 8. Competitive Strategies & the Role of IT (continued) • Growth – Expand production capacity – Expand into global markets – Diversify – Integrate into related products and services.
- 9. Competitive Strategies & the Role of IT (continued) • Alliance – Broaden your base of support • New linkages – Mergers, acquisitions, joint ventures, “virtual companies” – Marketing, manufacturing, or distribution agreements.
- 10. Competitive Strategies & the Role of IT (continued) • Other Competitive Strategies – Locking in customers or suppliers • By building valuable new relationship with them – Creating switching costs • Extranets • Proprietary software applications • Example: Wal-Mart
- 11. Competitive Strategies & the Role of IT (continued) • Other Competitive Strategies (continued) – Raising barriers to entry • Improve operations or promote innovation – Leveraging investment in IT • Investing in IT enables a firm to build strategic IT capabilities that allows the business to take advantage of strategic opportunities
- 12. Examples
- 13. Strategic Uses of Information Technology Improving Promote Locking in Business Customers Strategy Business Process Innovation and Suppliers IT Role Use IT to reduce Use IT to create •Use IT to improve costs of doing new products or quality business services •Use IT to link business to customers and suppliers Create New Maintain Valuable Outcome Enhance Business Customers and Efficiency Opportunities Relationships
- 14. Strategic Uses of Information Raise Technology Build a Build a Strategic IT Strategic Strategy Barriers to Entry Platform Information Base IT Role Increase amount Leverage Use IT to provide of investment or investment in IS information to complexity of IT resources from support firm’s needed to operat- ional uses competitive strategy compete to strategic uses Create New Enhance Outcome Increase Business Organizational Market Share Opportunities Collaboration
- 15. The Value Chain Administrative Coordination & Support Services Human Resource Management Technology Development Procurement of Resources Marketing Inbound Outbound Customer Operations and Logistics Logistics Service Sales
- 16. INFORMATION SYSTEMS AND BUSINESS STRATEGY Firm Value Chain
- 18. The Internet Value Chain Marketing and Sales and Support and Internet Product Distribution Customer Capability Research Feedback Data for market •Low cost •Access to customer Benefits research, com-ments online to distribution establishes •Reaches new •Immediate re- Company consumer sponse to customer customers responses •Multiplies problems contact points Opportunity for Create New Maintain Valuable Enhance Advantage Business Customers and Efficiency Opportunities Relationships
- 19. Strategic Positioning of Internet Technologies High Global Market Product and Services Penetration Transformation Strategy E-Commerce Website E-Business; Extensive Value-added IT Services Intranets and Extranets Solution Performance Cost and Improvements in Efficiency Business Improvements Effectiveness E-Mail, Chat Systems Intranets and Extranets E-Business Processes Connectivity Low High Internal Drivers
- 20. Section II • Using Information Technology for Strategic Advantage
- 21. IT Used for Competitive Strategy • Use of IT in two different ways. 1. Support Operations 2. Strategic Management
- 22. Building a Customer Focused E Business • Concept changed from manufacturing volume to improving customer value. • Key success for many firms is maximizing customer value • Ability to help them keep customers loyal, anticipate their future needs, respond to customers concerns, and provide top quality customer service.
- 23. Customer Expectation • Keep track of their preferences • Keep up with market trends • Supply products and services • Ecommerce offers faster, responsive and high quality product and services tailored to individual customer preferences
- 24. Role of Ecommerce Customers • Use Internet to ask questions • Air complaints • Evaluate products, request support • Make and report purchases
- 25. Customer-Focused E-Business Let customers place orders directly Let customers check order history and delivery status Let customers place orders thru distribution Build a partners community of customers, employees, and partners Customer Transaction Database Database Link Employees Give all and distribution employees a partners complete view of customers
- 26. Business Reengineering and Quality Management Business Quality Business Improvement Reengineering Incrementally Improving Radically Redesigning Business Definition Existing Processes Systems Any Process Strategic Business Processes Target Potential 10%-50% Improvements 10-Fold Improvements Payback Low High Risk Same Jobs - More Efficient Big Job Cuts; New Jobs; Major What Changes? Job Redesign Primary IT and Work Simplification IT and Organizational Redesign Enablers
- 27. Example
- 28. Improving Business Quality • IT can be used to improve business performance in many ways rather than supporting reengineering process • TQM: Total Quality Management: Quality as per customer not supplier. • Performance, reliability, durability, responsiveness
- 29. TQM • May use a variety of tools and methods to seek continuous improvement of quality, productivity, flexibility, timeliness, and customer responsiveness.
- 30. Companies using TQM are committed to • Even better more appealing and less variable quality of product or service • Even Quicker less variable response from design and development through supplier and sales channels • Even greater flexibility in adjusting to customers shifting volume and mix requirement
- 31. Example
- 32. The Customer- Focused Agile Competitor Cooperate with Anticipation of Business Partners future needs and Competitors Customization Conformance Give Customers Organize to Solutions Master to Problems Change Leverage the Impact of People and IS Resources
- 33. Creating virtual Company • Without meeting set up meetings • A company that uses IT to link people, assets and ideas • Uses organization structure called Network structure since most are linked through Internet and Intranets
- 35. Virtual Corporations Adaptability Borderless Excellence Six Characteristics of Virtual Companies Technology Trust-Based Opportunism
- 36. Knowledge Management Systems • Many companies are building knowledge management systems to manage organizational learning and business know-how. • Goal is to help knowledge workers create, organize and make important IS adjustments when ever there is a need in an organization • Includes processes, procedures, patents, reference works, formulas, “best practices” etc. • KMS facilitate organizational learning an knowledge creation. • Internet and intranet, groupware, knowledge bases, online discussion groups are some key technologies that may be used by a KMS.
- 37. Knowledge Management Systems Technical Solution Support Knowledge Staff Customers Development Engineers Intranet The Internet Product Other Managers Vendors
- 38. Sustaining Strategic Success • Sustained success in using IT strategically seems to depend on three sets o factors: –Environment –Foundation factors –Management Actions and Strategies
- 39. Key Factors for Sustaining Strategic Success •Size •Creating switching •Geographical scope costs •Product scope •Exploiting •Organization structure knowledge •Technological resources Environment •Developing •Knowledge resources response strategies •Managing risks Performance Firm